Money talks

Social Return on Investment

The economic and social value created by social firms

Sheila DurieThe SROI Network and the SROI Project in

Scotland

The economic case

The economic case is strong for investment in social firms and in employing people with disabilities

In the UK, Government estimates that a disabled person will stay on long-term benefits for an average of 8 years, and so every time a social firm employs a disabled person, we should count 8 years of benefits saved for the state. In the UK this would amount to over 70,000 euros for each disabled employee in a social firm.

Social Value Creation

BUTThere are also benefits to other stakeholders, such as the

people who work in social firms, their families, their communities, health services etc. Social firms create value for these stakeholders as well and have potential economic consequences for local state expenditure, as well as wider

benefits to society

SOCIAL FIRMS CHANGE PEOPLE’S LIVES

The challenge has been to measure these benefits and bring them into our business case for investment

This is what ‘Social Return on Investment’ is designed to do

Why Social Return on Investment?• It describes the VALUES of changes to stakeholders by

using financial proxies to represent values not usually captured in a market economy – social, community and environmental benefits

• It gives a voice to stakeholders that have been excluded in the past, e.g. disabled workers in social firms and theirt families

• It is based on standard accounting and commercial investment principles

• It makes sense to funders as a way of representing the value created by an activity and helps communicate of the value of the work to ‘the people that matter’

• It involves measuring change –what funders are really looking to invest in

Inputs Outputs Outcomes Impacts

For each stakeholder (e.g. disabled workers, their families, their community, their state support agencies, local employers and businesses etc.) we look at:

Inputs - resources invested in the activity Outputs – the description of the activity e.g. 20 disabled people employedOutcomes - changes to people resulting from the activity, i.e., a new job, increased income, improved stability in life, improved quality of life Indicators of change – how do we know change has happenedQuantities of change – how many of the stakeholder group experience changeFinancial proxies – how we value the changeImpact = Quantities times proxies, less reductions to reflect that some change happens anyway and some change is created by other factors

Theory of Change

How does it work?

SROI aims to be as robust a process as possible

• Based on a set of principles

• Based on a consistent process and set of stages

• Quality assurance processes are now in place through the SROI Network

Understand what changes

Value the things that matter

Only include what is material

Do not over claim

Be transparent

Verify the result

Case studies from social firmsin the UK

• Six Mary’s Place Guest House

• Solstice Nurseries

• Lawnmowers Independent Theatre Company

• Millrace IT

• Pack IT

• Overall summary analysis of the benefits to the state from social firms in the UK

Six Mary’s Place Guest House SROI Study

Six Mary’s Place SROI results

Total value added Value added per participant

Potential mental health savings to NHS through reduced use of services by employees in the social firm

£424,152 £21,208

Welfare benefits savings to the state £13,998 £1,029

New tax income to the state £8,780 £646

Increases in personal income of trainees leading to improved quality of life

£16,280 £814

Increases in personal income of employees leading to improved quality of life

£12,199 £897

Total impact in 2006

Investment was £72,258

SROI Index

SROI Index for the NHS

£424,152

£5.87

868

£24,593

Solstice Nurseries Social Firm SROI Study

Solstice SROI results

Total value added Value added per participant

Potential mental health savings to NHS through reduced use of services by employees in the social firm

£137,420 £11,452

Salary savings to NHS from secondment £10,396

Welfare benefits savings to the state £15,085

New tax income to the state £12,630

Increases in personal income of trainees leading to improved quality of life

£14,040 £1,170

Increases in personal income of employees leading to improved quality of life

£9,996

Disabled people are more socially included £12,170 £1,014

Total savings for 2006

SROI Index

£211,737

£2.93

£13,636

Lawnmowers Independent Theatre Company SROI study

The Krokodile Krew – hosting nightclubs and events

Changes that were valued

• Maintenance of independent living

• Costs saved to government in consultancy work undertaken by Lawnmowers

• Increased earnings of participants

• Value of specialist input on training compared to other training available

• Savings on day care provision for clients who were empowered to join

Results

• Lawnmowers returned £4.25 in social value for every £1 invested initially

• Payback period of 9 months

“This SROI analysis has explored some of the connections between the social aims of the project’s work and the economic advantage of organising support to people with Learning Disabilities… a standard economic appraisal used in normal business analysis is not appropriate here and certainly will not capture the real value of the work of Lawnmowers.”

Millrace IT SROI study

• Social firm offering computer recycling, in partnership with a commercial company

• Investigated the incremental costs and savings of employing disabled people

• Monetised landfill costs avoided, welfare benefits reductions and tax take increases for employed staff, and potential NHS savings

• £20,561 average savings per participant from the NHS

• SROI index of £7.44 for every £1invested

PACK IT SROI Study

• Social firm offering fulfilment services: mailing, storage, assembly, distribution

• Investigated the incremental costs and savings of employing disabled people

• Monetised welfare benefits reductions and tax take increases for employed staff, avoidance of day care costs, incremental leisure expenditure

• Recognised distance travelled as an important social impact but didn’t monetise it

• SROI index of £1.90 for every £1 invested

Applying an SROI approach to the social firms sector in the UK

• Taking the numbers of disabled people in full and part-time employment at the time (2008),assuming 75% were previously long-term benefit claimants and would expect to remain on benefits for 8 more years - £30.6million annual savings to the Treasury

• If all workers experienced the same social inclusion gains as the workers at Solstice, then another £1m in value has been created for disabled workers

• If all those with mental health problems working in social firms experience the same mental health improvement as Solstice, Millrace IT and Six Mary’s Place, then the health service in the UK might be saving in the region of £8.4million each year

The SROI Network in the UK is the home of quality standards and also has European and international memberships. The website has a downloadable Guide to SROI:

www.thesroinetwork.org

The SROI Project in Scotland will by the end of this year hold a databank of indicators and proxies for use in SROI analyses

www.sroiproject.org.uk

Further information on SROI